b'Market UpdatesManufacturing and Cargo Developments in BatamBatams Manufacturing and Trade Performance BatamandpartsofKarimunandBintanwereformally2009declared as a Free Trade Zone (FTZ) in 2009. The special(FTZ)regime provides exemptions from customs and a range oftaxes including import duties, sales tax, value added tax, as(SEZ)well as taxes on luxury goods. There are plans to designateBatam as a Special Economic Zone (SEZ) to further boost its attractiveness to foreign investors. Batams Foreign Direct Investments (FDI)Batams FTZ advantages have since attracted foreign directinvestments (FDIs) from various industries such as shipping and manufacturing. In particular, Batam has developed to2009FDIsbecome the largest shipbuilding area in Indonesia.Following the global financial crisis in 2009, FDIs in Batam(BPBatam)2013have reportedly softened due to global weakness in keymanufacturingsectorssuchasshipbuildingandoiland gas. On top of the global softening offshore marine sector,FDIsrising wages is also cited as one of the deterring factors for20142017investments. According to BP Batam, minimum wages haveFDIs;2017FDIsbeen on a steep upward trend since 2013. 4.53FDIsSimatelexNotwithstandingtheabove,theIndonesiangovernmentPT Pegatron Technology IndonesiaBatamindocontinued to step up their efforts to draw in new foreign4000investmentsandtorepositionBatamasanattractive manufacturing hub. Between 2014 to 2017, Batam saw aForeign Investment Realization Value in Batam Based progressive increase of new FDIs, which recorded a high ofon Permanent Business License (PBL) 2016-2017 US$453 million in 2017, arising from other sectors. Notable2016-2017recent FDIs into Batam included electronics manufacturers such as Pegatron and Simatelex. PT Pegatron Technology Indonesia, a subsidiary of a Taiwanese electronics giant500Pegatron, opened its US$40 million factory in the Batamindo400452.86In Million US$295.31 1.80*IndustrialPark,markingPegatronsfirstoperationsin300Southeast Asia.200144.81 163.00 128.46 168.42 165.88 124.8210070Batams Foreign Trade 4042.3210Singapore remains to be Batams top trading partner, with0close to half of its exports bound for Singapore and about2014201520162017Up to June 201830%ofitsimportsfromSingapore.Batamsothertop20186export trading partners are US and China, while top import*Up to May 2018 20185NewExpansion Source: Development Progress of Batam (2018)trading partners are China and Japan. :2018Batamstopexportcommoditiesincludeelectrical machinery and equipment and mineral fuels, accountingfor 28% and 17% of the total exports by value in 2018.30%Exports from Batam saw a drop from US$11.3B in 2014 to US$8.4B in 2016 due to the downturn in the shipbuildingand electronics sector. Slight recovery was observed from2017 onwards, and exports reached US$9.5B in 2018. As for imports, electrical machinery and equipment is also2018thelargestcommodity,accountingfor41%ofthetotal28%17%imports by value in 2018. Imports have grown strongly in2014113201684the last 2 years, with a 20% year-on-year growth in 2018.2017201895This has caused the trade balance to shrink to US$0.6B in20182018, as compared to US$2.3B in 2016.41%201820%2016232018612 Changi Cargo Insight'